Careshield Life: A ‘new’ beginning.

Update (Jan 2021): Careshield Life Payouts have increased by 2% from 2020. For all insureds who have not claimed in 2020 AND are below 67 as of Dec 2020, the benefit payout from this year onwards (if you claim) is $612.

(Information about Careshield Life is extracted from MOH website and links within https://www.careshieldlife.gov.sg/careshield-life/about-careshield-life.html)

Careshield was put on the backburner for a while, but now it has been confirmed to start on 1 Oct. It is a long term care disability insurance. We write more on long term care insurance here, and contrast it across different types of disability insurances here, but the gist is such insurances are designed to protect against the cost of taking care of you in event of disability. Careshield is especially designed for the case where you need someone to take care of you on a long term basis.

Why do we need such insurance?

According to MOH, 1 in 2 healthy Singaporeans aged 65 could become severely disabled in their lifetime, and may need long-term care. Examples of causes can be stroke, injuries to spine, medical conditions leading to complications such as diabetes or dementia.

In such situations, living costs will go up. If you are unable to take care of yourself and require long term assistance, there is a need to pay for someone or some form of care. If you need nursing home care for example, MOH estimates that it costs between $2,000 to $3,600 a month before subsidies. Although subsides can be significant, subsidies are pegged to household incomes, and the choice of home type and care type is subject to the subsidy conditions.

It is difficult for individuals (not to mention, expensive) to self insure against such situations. The pooling of risks helps to mitigate against such risks. (and that is what insurance does. Pooling of risks). On top of that, many of us don’t actually consider such risks until either the event has happened or is imminent, which would mean, it is too late. Hence for people who have pre-existing conditions. Finally, if you are young, you’d normally not think that this will happen to you. According to Singapore Stroke Registry Annual Report 2016, about 2.6% of stroke cases in 2016 occurred in patients under 30. Admittedly it is very rare, but it can be catastrophic. For such individuals, it can be difficult to get cover.

Careshield Life helps because it covers everyone.

Side note: the best time to buy insurance, or rather, to do a proper financial plan is before you need it.

Ok, so, how does Careshield life affect me?

First thing to note is that Careshield Life is age bound, and cover starts when you are 30. As it is a new policy, the impact of the plan would affect different age groups differently. The three main groups are

1. Those who are below 30 in 2020 (born after 1990)

2. Those who are between 30 and 40 in 2020 (born between 1980 and 1990)

3. Those who are 41 and above in 2020 (born in 1979 or earlier)

1. For those who are below 30 in 2020 (born after 1990)

Singaporeans in this age group will be covered automatically once you turn 30. Nothing much to do until then. Premiums and other information will be made closer to your 30th birthday.

2. For those who are between 30 and 40 in 2020 (born between 1980 and 1990)

This group is the one that is affected first. Singaporeans in this group will be covered on 1st Oct 2020 (unless you turn 30 after 1st Oct, in which case, your birthday will be the date of cover.). Your policy details will be sent to you then.

Note that for these two groups of Singaporeans, this is a compulsory scheme, much like Medishield Life. There is no opt out. Also the plan covers Singaporeans and Permanent Residents, including those who become Singapore Citizens or Permanent Residents from 1st Oct 2020, subject to certain terms.

3. For those who are 41 and above in 2020 (born in 1979 or earlier)

For those who are older you will be given an opportunity to join from the end of 2021, if you are not severely disabled.

Furthermore, the government will auto enrol Singaporeans who are between 41-50 (born between 1970 and 1979) as at 2020 into Careshield IF you are not severely disabled AND you are insured under Eldershield 400 (i.e. you did not opt out). However, this group of Singaporeans can choose to opt out of Careshield if they so desire.

As of now, the details for this group is still limited so we will update when we know more. MOH has said that more details will be provided closer to the end of 2021.

How does it work?

Careshield life works as follows:

1. Careshield life provides lifetime cover with a limited premium term. Premiums are paid till age 67 (or in some cases, 10 years after you join the scheme, whichever is later)
   

2. In the event of severe disability*, you will have a payout for as long as you are severely disabled. Unlike Eldershield where the payout is capped at 72 months.
   

3. Payouts increase over time. That means if you are not severely disabled and have not made a claim, the payout (which starts at $600 a month in 2020) will increase over time, until you are 67. The government has announced that the increase is 2% per year until 2025, after which the payout increase and premium adjustments will be made. The $600 a month is for all careshield applicants who start in 2020; applicants who enter in 2021 will be covered for $612. Once a claim is made, the increase of payout for the applicant will cease and you will receive the payout amount of the year a successful claim was admitted. The increase in payout will also end when you turn 67; subsequent payout amounts will be based on the payout amount of the year you turn 67. Do check out MOH site for more information.
   

4. Premiums. In Singapore, nothing is for free. So of course Careshield Life will cost us something; we do not like “free riders” in Singapore. Premiums will increase every year; currently it is scheduled to increase by 2% per year until 2025, in line with the increase in payout. Subsequent increases will depend on the claims experience and the trends. What is important is that Singapore is also a big believer of no one being left behind, so no one will lose their coverage because of the inability to afford their premiums. So there are Means tested Premium subsidies, Transitional Subsidies, and Additional Premium Support. Check out the MOH site to see how much subsidies you receive and how much premium you will need to pay. Oh and women pay more than men. This is less of a discrimination and more of a reality of life. Women tend to live longer, and older people are more likely to suffer from severe disability. Furthermore, MOH reports that women aged 60 are expected to spend 7.8 years requiring assistance with any of the Activities of Daily Living, compared to 2.6 years for men aged 60.

Is there anything I need to do?

Firstly, a note on subsidies. Singapore uses means testing to determine the level of subsidies to be given. This targeted approach results in a more efficient use of resources as we can assist those in need more. However, the reality is the data in the system may not be updated, due to time lags. Therefore, for some of us whose life has changed recently (example, had a new child, one member of the family has stopped working), there may be a need to update the information that the government has collected earlier. This will ensure you receive the appropriate subsidy. You can do so here. Do note that the link is for medishield life, but it is the same link if you were to access it via the careshield site as the database is centralised.

Secondly, there will be supplementary cover provided by private insurers. This helps you to enhance your coverage, such that in event that you need the payouts, you can receive higher payouts. The benefit is that the higher payouts allows you to have some freedom to choose the desired level of cover. Financial security is very helpful in ensuring a better quality of life; that way you can focus on maximizing your life instead of minimising your costs.

What do we at Your Financial Strategists think about this?

This is a new, albeit non-optional, change in your financial situation. At Your Financial Strategists, we view this as a good move on the part of the government. In reality, insurance is a necessary expense where the benefits are intangible, and the true benefits are only enjoyed upon claims. This makes it difficult for people to fully grasp the necessity of such instruments. Just like airbags and seat belts, left to the free market, there would be under consumption because we are quite bad at imagining the worst case scenarios.

We recognize that our government always aims to support the lowest incomes, and provide the most basic of needs. That is why Careshield Life is designed, both in terms of premiums and cover, to manage that need. If you are a higher income earner, this might exclude you from certain means tested subsidies and hence you may find that the benefit is too low even in government institutions. Furthermore, you might want to have a better quality of life, perhaps home based nursing, or private nursing home. All these can be a drain on your family finances.

Finally, we believe that every financial decision needs to be considered in the context of your total financial health. Our advice is to take this opportunity to have a discussion with your advisor to do a review, especially if you have not met your advisor. It is time to arrange for an appointment with your advisor, who will assess your financial situation, upcoming changes and create a plan to help you achieve your dreams.

If you enjoyed reading this article, please feel free to browse our blog to read our other articles. Let us know what other issues you’d like us to write on.

* Severe disability is the inability to perform at least 3 out of 6 Activities of Daily Living (ADLs) without assistance. The 6 ADLs are the actions we take between the time we wake up and we have breakfast.

1. Transferring (moving from a bed to a chair or wheelchair, or vice versa)

2. Walking or moving (moving indoors on level surfaces)

3. Toileting (using the lavatory or protective undergarments or surgical appliances)

4. Washing (in bath or shower, including entering the bath or shower, or by other means to wash)

5. Dressing (to put on or take off clothes, braces, artificial limbs or other medical appliances)

6. Feeding (to feed oneself once food has been prepared)